Four out of 10 new properties in England and Wales are now sold as leasehold, ranging from one bedroom flats in city centres, to four bedroom detached homes in rural areas.
Persimmon, Bovis Homes, Bellway and Taylor Wimpey are just a few of the market leaders who have been accused of trapping customers into leasehold contracts that have spiralling ground rents which render them almost impossible for homeowners to sell on.
Homeowners are finding that their leases were created, in some cases, years before their build was even completed and the freehold had been sold within two years of the lease being created. This is all before the buyer has even taken possession of the house.
And the problems only escalate from there, reports are now circulating that some banks and building societies are refusing mortgages on properties with onerous ground rent clauses.
NAEA Propertymark member and long established property manager Paul Reynolds of Renown Estates in Cramlington has been tracking the issue for some time:
“It’s a big topic and one that I have been following for the last seven or eight years. Many of the properties here were sold with 99 yearlong leases and as all neighbours were on the same level, it was never thought to be much of a problem. That was until investors cottoned on and started buying the freeholds and hiking the prices.
“Recently I had two houses to list on the same estate, they were of a similar size, condition and value. One freeholder asked for around £10,000 and the other £3,000; there isn’t any maths involved in the valuation. I get regular emails from investors with seemingly bottomless pockets looking to buy ground rents and my fear is that homeowners will be stuck.”
According to the numbers published by Bovis Homes last month, their capital turn increased by 7% between 2015 and 2016. Taylor Wimpey boasted a 20.8% profit margin for 2016 and Persimmon’s full year revenue was up 8% to £3.14bn.
In December 2016, Taylor Wimpey announced that it has stopped selling leasehold houses with ground rents that double every decade and that recent sales have now moved to a formula based on the retail prices index. This means that ground rent should increase with inflation at a steady rate.
Taylor Wimpey have also announced they will be conducting a review of leasehold issues that have arisen, however this has been delayed until April.
Both Bellway and Persimmon are yet to address customer and industry concerns, however Bellway have defended their actions to homeowners by stating that “there is no leasehold scandal”.
Full article http://www.naea.co.uk/news/march-2017/the-property-trap/